DEMAND (25 YEARS EXPERIENCE) PUNEET GROVER

DEMAND
FILL IN THE BLANKS
1. If the given commodity is an inferior good, then a decrease in income leads to……………in demand.
2. Law of demand states the…………… relationship between price and quantity demanded, keeping
other factors constant.
3. Cross demand is positive in case of……………goods, while negative in case of……………goods.
4. Substitute goods have……………demand.
Change in Price (P)
5. Slope of Demand Curve =
?
6. ……………is also known as Decrease in Quantity Demanded.
7. In case of expansion in demand, there is a ……………movement along the same demand curve.
8. ……………goods are those goods which are used together to satisfy a particular want.
9. The sum total of both the substitution and the income effects is called the…………….
10. If demand fora commodity rises even without any change in its price, then it is known as……………
.
11. ……………goods are those goods which can be used in place of one another for satisfaction of a
particular want.
12. If a fall in the price of one good raises the demand for another good, the two goods are
called…………… .
13. ……………goods refer to those goods whose demand increases with an increase in income.
14. In case of decrease in demand, there is a……………shift in the demand curve.
15. Complementary goods have……………demand.
16. ……………shows the tabular presentation of various quantities of a commodity a consumer is
willing to buy at different prices, during a given period of time.
17. A rise in price of tea will lead to an……………movement in the demand curve of tea.
18. Cross price effect occurs in case of both……………goods and……………goods.
19. If a household buys less of a commodity due to rise in income, then the given commodity must be
an……………one.
20. There will be a……………in the demand curve of cars with an increase in the price of petrol.

True or False with Reasons

1. If a fall in price of Good X leads to a rise in demand for Good Y, then X and Y are substitute goods.
2. Increase in price of bulbs will shift its demand curve towards left.
3. Demand of a given commodity can be specified irrespective of its price.
4. A rise in price of tea will lead to an upward movement in the demand curve of coffee.
5. Due to fall in cost of making bicycles, its price has reduced. It will shift the demand curve of bicycles
towards right.
6. Demand of a commodity may rise or fall even when price of the given commodity remains constant.
7. Demand curve of Pepsi will not shift with rise or fall in its price.
8. Cross price effect occurs in case of substitute goods only.
9. Demand curve for automobiles shift towards right due to opening up of a new automobile dealer in
the town.
10. A shift in demand curve of the given commodity may be caused by change in any determinant of
demand function.
11. Expansion in demand leads to an upward movement along the same demand curve.
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12. Cross demand is positive in case of substitute goods.

13. Market demand curve is obtained by vertical summation of individual demand curves.
14. Market demand curve is flatter than individual demand curves.
15. Due to increase in one more member, the family expenditure on milk increased. It is an example of
extension in demand.
16. The demand curve of a commodity may not obey the law of demand if price of its substitute rises.
17. In case of giffen goods, demand curve slope upwards.
18. Consumer's taste and preferences must change in order to apply Law of Demand.
19. Size and composition of population affect the demand for an individual.
20. Law of Demand indicates the direction and amount of change in demand of a commodity due to
change in its price.
21. If a household buys more of a commodity due to rise in income, then the given commodity must be
an inferior one.
22. If X and Y are substitutes of one another, then relationship between the prices of good X and demand
of good Y will be shown by a curve that will slope upwards.
23. 'Ceteris paribus' clause in the law of Demand means that the price of the given commodity does not
change.
24. The exceptions to the law of demand may be true for an individual but not for the whole market.
25. If more is demanded at the same price or the'same quantity is demanded at a higher price, it is known
as extension of demand.
26. Cross demand tells the relationship between the price and demand for a commodity.
27. If the goods X and Y are substitutes, a rise in price of X will result in a rightward shift in demand
curve of Y.
28. The demand for a commodity always increases with increase in the price of other goods.
29. An increase in the income of a consumer would lead to an increase in demand for all types of goods
demanded by him.

Matching Type Questions

Q.1 From the set of statements given in Column I and Column II, choose the correct pair of statements:
Column A Column B
(a) Substitute Goods (i) An increase in price of substitute leads to a decrease in the
demand for given commodity
(b) Complementary Goods (ii) An increase in price of complementary good leads to an
Increase in the demand for given commodity
(c) Normal Goods (iii) Goods whose demand does not change with an increase in
income
(d) Inferior Goods (iv) Goods whose demand decreases with an increase in income

Q.2 Match the statements given under A with the correct options given under B.
Column A Column B
(i) Decrease in Price of a Substitute Goods (a) Rightward shift in demand curve
(b) Leftward shift in demand curve

Q.3 Match the statements given under A with the correct options given under B.
Column A Column B
(i) Expansion in Demand (a) Upward movement along the same demand curve
(ii) Contraction in Demand (b) Downward movement along the same demand
curve

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Q.4Match the statements given under A with the correct options given under B.
Column A Column B
(i) Substitute Goods (a) Car and Pen
(ii) Complementary Goods (b) Coke and Pepsi
(iii) (c) Bread and Butter

Q.5 Match the statements given under A with the correct options given under B.
Column A Column B
(i) Normal Goods (a) Demand decreases with an increase in income
(ii) Inferior Goods (b) Demand decreases with an increase in price
(iii) (c) Demand increases with an increase in price
(iv) (d) Demand increases with an increase in income

Q.6 Match the statements given under A with the correct options given under B.
Column A Column B
(i) Substitute Goods (a) Car and Petrol
(ii) Inferior Goods (b) Rightward shift in the demand curve
(iii) Expansion in Demand (c) Rice and Wheat
(iv) Complementary Goods (d) Increase in Quantity Demanded
(v) Increase in Demand (e) Demand decreases with an increase in income

Q.7 Match the statements given under A with the correct options given under B.
Column A Column B
(i) Normal Good (a) Relationship between demand of given commodity
and prices of related goods
(ii) Decrease in Demand (b) Decrease in Quantity Demanded
(iii) Substitute Goods (c) Demand increases with increase in income
(iv) Cross Demand (d) Leftward shift in the demand curve
(v) Contraction in Demand (e) Competitive Demand

Multiple Choice Questions (MCQs)

1. Which of the following is an example of complementary goods?
(a) Tea and Coffee (b) Coke and Pepsi
(c) Rice and Wheat (d) None of these

2. The demand for normal good……………with an increase in income of the consumer.

(a) Increases (b) Decreases
(c) Remains same (d) Either increases or decreases

3. Increase in price of substitute good leads to:

(a) Expansion in Demand (b) Increase in Demand
(c) Decrease in Demand (d) Contraction in demand

4. A, B and C are three commodities, where A and B are complementary; whereas A and C are
substitutes. With increase in price of commodity A:
(a) Demand of all the-commodities A, Band C will fall
(b) Demand of commodities A and B will fall, whereas demand of C will rise
(c) Demand of commodities A and C will fall, whereas demand of B will rise
(d) Demand of commodities B and C will fall, whereas demand of A will rise
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5. When two or more goods are demanded simultaneously, it is known as:

(a) Joint Demand (b) Alternate Demand
(c) Direct Demand (d) Composite Demand

6. There will be a ……………in the demand curve of cars with an increase in the price of petrol:
(a) Rightward Shift (b) Upward Movement
(c) Leftward Shift (d) Downward Movement

7. The demand curve for a commodity is generally drawn on the assumption that:
(a) Prices of substitute goods do not change
(b) Taste and preferences of the consumer remain the same
(c) Income of the consumer remains the same
(d) All of these

8. Which one of these is not an example of substitute goods?

(a) Tea and coffee (b) Coke and Pepsi
(c) Ink pen and Ball pen (d) Bread and Butter

9. Law of Demand states the relationship between price and quantity demanded.
(a) Inverse (b) Positive (c) Proportional (d) None of these

10. Expansion in demand leads to:

(a) Rightward Shift in demand curve
(b) Downward Movement along the demand curve
(c) Upward Movement along the demand curve
(d) None of these

11. Which one of these is a determinant of Individual demand?

(a) Size and composition of population (b) Season and Weather
(c) Distribution of Income (d) None of these

12. From the given demand schedule, determine the effect on demand curve:
Price (₹) 20 20
Demand (Units) 100 70
(a) Rightward Shift in demand curve
(b) Leftward Shift in Demand curve
(c) Upward Movement along the demand curve
(d) Downward Movement along the demand curve

13. Expansion in demand occurs due to:

(a) Rise in price of the given commodity
(b) Fall in price of the given commodity
(c) Rise in price of substitute goods
(d) Fall in price of complementary goods

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14. There is a sudden change in climatic conditions resulting in hot weather. Assuming no change in the
price of the cold drinks, it will lead to:
(a) Upward movement along the same market demand curve
(b) Downward movement along the same market demand curve
(c) Rightward shift in the market demand curve
(d) Leftward shift in the market demand curve

15. A movement along the demand curve for soft drinks is best described as:
(a) Increase in demand (b) Decrease in demand
(c) Change in quantity demanded (d) Change in demand

16. If more is demanded at the same price or same quantity at a higher price, this fact of demand is
known as:
(a) Extension of demand (b) Increase in demand
(c) Contraction of demand (d) Decrease in demand

17. Cross demand states the relationship between:

(a) Demand of given commodity and price of related goods
(b) Demand of given commodity and Income of the consumer
(c) Demand of given commodity and taste and preferences
(d) None of these

18. Which of the following is not an assumption of law of demand?

(a) Price of substitute goods do not change
(b) Income of the consumers remain same
(c) There is no change in tastes and preferences of the consumers
(d) Price of the given commodity does not change

19. If change in price of good A affects the demand for good B, then:
(a) A is a substitute of good B (b) A is a complement of good B
(c) Both (a) and (b) (d) Either (a) or (b)

20. In a typical demand schedule, quantity demanded:

(a) Varies directly with price (b) Varies proportionately with price
{c) Varies inversely with price (d) Is independent of price

21. Which of the following is a determinant of market demand?

(a) Income of the consumers (b) Season and weather
(c) Price of related goods (d) All of the above

22. Which of the following factors will lead to a leftward shift in the demand curve?
(a) Increase in income in case of inferior goods
(b) Increase in income in case of normal goods
(c) Increase in Population (d) Expectation of future increase in price

23. Decrease in the price of the complementary goods leads to:

(a) Upward movement along the same demand curve
(b) Downward movement along the same demand curve
(c) Rightward shift in the demand curve
(d) Leftward shift in the demand curve
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24. If price of good 'X 'rises and it leads to a fall in demand for good 'Y', then the two goods are:
(a) Substitute goods (b) Complementary goods
(c) Normal goods (d) Inferior goods

25. Market demand curve is obtained by……………summation of the individual demand curves,
(a) Vertical (b) Horizontal
(c) Both (a) and (b) (d) Neither (a) nor (b)

26. Ceteris paribus means:

(a) Holding supply constant (b) Holding demand constant
(c) Price being constant (d) Other factors being constant

27. An increase in real income of a consumer induces him to buy more of a commodity whose prices
have fallen.This is known as:
(a) Inducement Effect (b) Substitution Effect
(c) Income Effect (d) Utility Effect

28. Expansion of Demand is associated with:

(a) Rise in Price, Rise in quantity demanded
(b) Fall in Price, Fall in quantity demanded
(c) Fall in Price, Rise in quantity demanded
(d) Rise in Price, Fall in quantity demanded

29. If X and Y are Complementary Goods, then with increase in price of X:

(a) Demand of X will decrease and demand of Y will increase
({b) Demand of X will increase and demand ofY'will decrease
(c) Demand of X and Y will increase
(d) Demand of X and Y will decrease

30. If Tea and Coffee are substitutes, a fall in the prices of Tea leads to:
(i) Rise in the demand for Tea (ii) Fall in the demand of Tea
(iii) Fall in the demand for Coffee (iv) Rise in the demand of coffee
(a) Both (ii) and (iv) (b) Both (i) and (iii)
(c) Both (ii) and (iii) (d) Both (iii) and (iv)

31. All except one of the following are assumed to remain same while drawing an individual's demand
curve for a product. Which one is it?
(a) Tastes and Preferences of the individual -
(b) Monetary income
(c) Price of the given product
(d) Price of related goods

32. With fall in price of a commodity, demand of the commodity increases as it becomes relatively
cheaper in comparison to other commodities. This effect is known as:
(a) Substitution Effect (b) Income Effect
(c) Law of Demand (d) Law of Diminishing Returns

33. The demand function of a product X is given as: Dx = 12 – 2Px, where Px stands for price. The
demand at price of ₹2 will be:
(a) 6 (b) 8 (c) 5 (d) 10
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34. The demand function of a product X is given as: Dx = 20 – 3Px, where Px stands for price. If an
Individual Y has a demand of 8 units, then market price of the product is:
(a) ₹4 (b) ₹5 (c) ₹3 (d) ₹4.5

35. The demand function of a product X is given as: Dx= 12 – 2Px, where Px stands for price. If there are
5,000 customers for the product, then market demand for the product at market price of? 3 will be:
(a) 40,000 (b) 30,000 (c) 20,000 (d) 16,000

36. Two commodities A and B can be inferred as close substitutes of each other if:
(a) Rise in price'of one leads to an increase in demand of other and vice-versa
(b) Rise in price of one leads to a decrease in demand of other and vice-versa
(c) Fall in price of one lead to fall in demand of other one, but not the other way round
(d) Rise in price of one lead to rise in demand of other one, but not the other way round

37. A goods can be considered a normal good if an increase in income of the consumer causes in demand
of the given good:
(a) Increase (b) No change
(c) Decrease (d) less than proportionate increase

38. Expansion and contraction in demand are caused by:

(a) Change in price of the given good (b) Change in income
(c) Change in prices of related goods (d) Change in population

39. When income of the consumer falls, the impact on price-demand curve of an inferior good is: (choose
the correct alternative)
(a) Shifts to the right (b) Shifts to the left
(c) There is upward movement along the curve
(d) There is downward movement along the curve

40. If due to fall in the price of good X, demand for good Y rises, the two goods are: (Choose the correct
alternative)
(a) Substitutes (b) Complements (c) Not related (d) Competitive

41. If with the rise in price of good Y, demand for good X rises, the two goods are:
(a) Substitutes (b) Complements
(c) Not related (d) Jointly demanded

42. The demand curve of a good shifts from DD' to dd'.

This shift can be caused by: (Choose the correct alternative)
(a) Fall in the price of the good
(b) Rise in the price of the good
(c) Rise in the price of substitute goods
(d) Rise in the price of complementary goods

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43. An increase in the price of Coffee will have the following effect on the demand curve of Tea:

44. The following movement in the demand curve is because of:

(a) Increase in price of given commodity
(b) Decrease in price of given commodity
(c) Increase in price of substitute good
(d) Decrease in price of complementary good

45. What does the following diagram represent?

(a) Change in Demand (b) Change in Quantity Demanded

(c) Both (a) and (b) (d) Neither (a) nor (b)

46. Which of the following represents market demand curve?

(a) D1D1 (b) D3D3
(c) D2D2 (d) None of the above

47. Which of the following diagram represents the situation of 'Expansion in Demand'?

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48. The slope of demand curve is generally:

(a) Negative (b) Positive (c) Constant (d) Either (a) or (b)

49. Any statement about demand for a good is considered complete only when the following is/are
mentioned in it (Choose the correct alternative):
(a) Price of the good (b) Quantity of the good
(c) Period of time (d) All of the above

50. Good X and good Y are complementary goods, while good X and good Z are substitute goods. What
will happen to good Y and good Z, if price of good X decreases?
(a) The demand for both goods, Y and Z, will decrease
(b) The demand for both goods, Y and Z, will increase
(c) The demand for good Y will increase and for good Z will decrease
(d) The demand for good Y will decrease and for good Z will increase

51. Which of the following is a reason for 'Change in Demand'?

(a) Change in Income (b) Change in Price of related goods
(c) Population increase (d) All of these

Assertion Reason Questions (ARQs)

1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives
given below:
Assertion (A): Change in quantity demanded of one commodity due to a change in price of other
commodity is cross demand.
Reason (R): Changes in consumer income leads to a change in demand.
Alternatives:
(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of
Assertion (A).
(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of
Assertion (A).
(c) Assertion (A) is True but Reason (R) is False.
(d) Assertion (A) is False but Reason (R) is True.
2. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives
given below:
Assertion (A): Complementary goods have joint demand.
Reason (R): Complementary goods are demanded simultaneously to satisfy a particular want.
Alternatives:
(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of
Assertion (A).
(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of
Assertion (A).
(c) Assertion (A) is True but Reason (R) is False.
(d) Assertion (A) is False but Reason (R) is True.

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3. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives
given below:
Assertion (A): Cross demand is positive in case of substitute goods.
Reason (R): An increase in price of substitute good leads to a decrease in demand for given
commodity.
Alternatives:
(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of
Assertion (A).
(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of
Assertion (A).
(c) Assertion (A) is True but Reason (R) is False.
(d) Assertion (A) is False but Reason (R) is True.

4. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives
given below:
Assertion (A): Market demand curve is flatter than individual demand curves.
Reason (R): Market demand curve is obtained by horizontal summation of individual demand
curves.
Alternatives:
(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of
Assertion (A).
(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of
Assertion (A).
(c) Assertion (A) is True but Reason (R) is False.
(d) Assertion (A) is False but Reason (R) is True.

5. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives
given below:
Assertion (A): Expansion in Demand leads to an upward movement along the same demand curve.
Reason (R): Upward movement along the same demand curve occurs due to an increase in price of
the given commodity.
Alternatives:
(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of
Assertion (A).
(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of
Assertion (A).
(c) Assertion (A) is True but Reason (R) is False.
(d) Assertion (A) is False but Reason (R) is True.

Statement Based Questions

1. Read the following statements carefully and choose the correct alternative from the following:
Statement 1: Market demand curve slope downwards due to inverse relationship between price and
quantity demanded.
Statement 2: Slope of demand curve is equal to change in quantity divided by change in price.
Alternatives:
(a) Both the statements are true. (b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.

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2. Read the following statements carefully and choose the correct alternative from the following:
Statement 1: Law of Demand makes a qualitative statement and not quantitative.
Statement 2: No proportional relationship between change in price and the resultant change in
demand is established by Law of Demand.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.

3. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 :There is an upward movement along the same demand curve in case of expansion in
demand.
Statement 2: Expansion in demand is also known as Extension in Demand or Increase in Quantity
Demanded.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.

4. Read the following statements carefully and choose the correct alternative from the following:
Statement 1: Substitute goods have competitive demand.
Statement 2: Change in the price of substitutes directly affects the demand for a given commodity.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.

5. Read the following statements carefully and choose the correct alternative from the following:
Statement 1: Slope of demand curve is based on the percentage change in price and quantity.
Statement 2: Due to inverse relationship between price and demand, the demand curve slopes
downwards.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.

6. Read the following statements carefully and choose the correct alternative from the following:
Statement 1: Income effect is negative in case of inferior goods.
Statement 2: In case of inferior goods, fall in income leads to decrease in demand for the good.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.

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